Oil Up Slightly Over Biden Remarks But Differing Demand Forecasts Remain Intact

Meanwhile, data reveals a growing volume of Russian oil entering Europe: File Image/Pixabay

Oil on Monday eked out modest gains after plummeting over 5 percent on Friday, on the dubious strength of U.S. president Joe Biden stating that a recession in his country isn't "inevitable."

Biden made the comment after speaking with former treasury secretary Lawrence Summers, and this caused Craig Erlam, senior market analyst at Oanda, to note that, "The market remains extremely tight, but the threat of recession is one of the few negative forces for crude prices.

"Whether that will be enough to create anything more than two-way price action is another thing."

Monday's rebound was also supported by Libya's oil minister reporting that crude production in his country had recovered to about 800,000 barrels per day (bpd) after having fallen to between 100,000 and 200,000 bpd.

West Texas Intermediate on Monday rose 0.7 percent to $110.27 per barrel at 2:10 p.m. in New York, while Brent for August settlement rose 0.9 percent to $114.13 per barrel.

Also on Monday came yet more signs that the embargoes on oil from Russia by European countries aren't all they seem to be: according to tanker tracking data compiled by Bloomberg, Europe's oil refineries took 1.84 million bpd of crude from the former Soviet Union last week, marking the third consecutive weekly increase; also, "steady ongoing declines appear to have slowed…the developments suggest those companies and countries who were unwilling to buy Russian have already stepped back, leaving the market to others who are happier to do so."

Bloomberg went on to note that "Shipments of Russian crude to the [Mediterranean] have soared," and "Turkey has also stepped in to take a lot more Russian crude that has been diverted to the region from northern Europe."

Additionally, while flows to Romania are little changed since the start of the year, those to Bulgaria are two and a half times as big as they were in January and early February.

As for Friday's massive oil price loss, Amrita Sen, director of research at Energy Aspects, said the demand fears that caused the declines "are very premature: we're still seeing very strong demand growth numbers, not just out of Asia but also out of Europe...despite the high prices."

When asked if demand destruction is imminent due to the high gasoline prices, Sen replied that Energy Aspects factored in a 5 percent decline versus 2019 levels in the U.S., but there was zero evidence of decline in Asia: "This is the first season after two or three years where there's no [Covid] restrictions….and jet demand is flying right now, sorry to use the pun."

Meanwhile, analysts anticipated limited summer increases from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, and this along with other market conditions caused Stephen Brennock, analyst at PVM, to state the majority view of his colleagues: "Supplies will remain tight and continue supporting high oil prices; the norm for ICE Brent is still around the $120-mark."